US TSYS WEAKER ON HAWKISH NY FED DUDLEY, SAFE-HAVEN BUY UNWIND

     US TSYS SUMMARY: Treasuries prices ended Mon weaker after mildly hawkish NY

Fed Dudley pushed mkt lower, with later 2-way flows and mild dip buying. Dudley

in AP interview said favored 3rd US rate hike in 2017; expects somewhat higher

inflation readings mo-over-mo, S/Term rates "pretty low." 

- Tsys opened NY weaker after overnight give-back of Friday safe-haven

pre-weekend buying amid N.Korea/U.S. tensions. When geopolitics proved calm in

this past weekend, accounts unwound such safe-haven buys but carefully as

N.Korea still event risk. US real$ arose in front end Tsys, while others did dip

buying in Tsys 7Y, 10Ys. Cash Tsys: accounts roll from May 2027 10Y to Aug 2027

10Y, before Tue 3/10/30Y auction settlement. FX-tied buying nr 10:19am ET and

later as US$/yen weak. Fast money did steepeners against 30Y bonds. O/N Repo:

Tsy 2Y note tight. MBS tight. 

- In Tsy futures, the Sep/Dec Tsy futures roll gets under way (only 1-2% Sept OI

rolled so far.) Fed Funds futures had a decent block buy of 6,000 FFQ at 98.845

at 11:57am ET. 

- TSYS 3PM ET: 2Y 1.318%, 3Y 1.473%, 5Y 1.771%, 7Y 2.033%, 10Y 2.217%, 30Y

2.805%.

US TSY FUTURES CLOSE: Mild late session two-way flow has Tsys off second half

lows following NY Fed Dudley's mildly hawkish comments in AP interview, earlier

USD surge that added to sell pressure has eased as well while sources report

decent sell programs taking profits in equities. Current futures levels: 

* Sep Ultra bonds down 14/32 at 167-19 (167-06L/168-01H) 

* Sep 30-yr Bond futures down 10/32 at 155-05 (154-27L/155-16H) 

* Sep 10-yr futures down 8.5/64 at 126-17.5 (126-15.5L/126-25.5H) 

* Sep 5-yr futures down 4.75/32 at 118-16 (118-15L/118-20.25H) 

* Sep 2-yr futures down 1.75/32 at 108-07.5 (108-07.75L/108-09.25H

US EURODLR FUTURES CLOSE: Lower across the strip, with the short end on lows,

Greens-Golds off session lows amid late two-way flow. Current White pack

(Jun'17-Mar'18): 

* Sep'17 -0.005 at 98.670 

* Dec'17 -0.020 at 98.555 

* Mar'18 -0.025 at 98.490 

* Jun'18 -0.025 at 98.440 

* Red pack (Sep'18-Jun'19) -0.025 

* Green pack (Sep'19-Jun'20) -0.025 

* Blue pack (Sep'20-Jun'21) -0.025-0.030 

* Gold pack (Sep'21-Jun'22) -0.030

US SWAPS: *** Spds have narrowed across the curve from marginally mixed levels

in the first half. Sources report better rate and spd receiving across the

curve, 2s/5s spd curve steepeners and spd flatteners out the curve on muted late

summer volume. Adding to narrow spds, chatter mkts awaiting possible large

multi-tranche issuance from Amazon (AMZN) (estimates from $16-25B), as well as

Apple (AAPL), either could easily weigh on thin Tsy mkts as details released.

Other desks keeping positions relatively pared during the thin summer trade, are

looking to add receivers as seasonal/quarterly issuance ramps up again late

August/early September. Desks also watching for Formosa and callable structures

to weigh on spds and OTC vol alike. Latest spread levels: 

* 2Y -0.88/25.50 

* 5Y -0.38/7.62 

* 10Y -0.31/-4.31 

* 30Y -0.25/-33.19

OUTLOOK: *** Data/speaker calendar (prior, estimate):

- Aug 15 Jul retail sales (-0.2%, +0.3%) 0830ET

- Aug 15 Jul retail sales ex. motor vehicle (-0.2%, +0.3%) 0830ET

- Aug 15 Jul retail sales ex. mtr veh, gas (-0.1%, --) 0830ET

- Aug 15 Jul imports price index (-0.2%, +0.2%) 0830ET

- Aug 15 Jul exports price index (-0.2%, --) 0830ET

- Aug 15 Aug Empire Manufacturing Index (9.8, 11.0) 0830ET

- Aug 15 12-Aug Redbook retail sales m/m (-0.3%, --) 0855ET

- Aug 15 Jun business inventories (0.3%, 0.5%) 1000ET

- Aug 15 Aug NAHB home builder index (64, --) 1000ET

- Aug 15 US Tsy $20.0B 52-Week Bill Auction 1130ET

- Aug 15 Jun net TICS flows ($57.3B, --) 1600ET

- Aug 15 Jun long term TICS flows ($65.8B, --) 1600ET

Eurodollar/Treasury option summary

Eurodollar options,

Block:

2030-0344ET, more in pit

+10k E2Z 85/87 2x3c spds, 3.0

0934ET

10k EDZ 83/85p spds, 3.0

1005ET

+20k EDZ 82p, cab

Pit/screen:

-16k EDH 81/82/83p flys, 1.5

-11k EDH 77/80/82p flys, 1.0

5k EDZ 83/85 put spds, 3.0

-4k EDH 77/80/82 2x3x1p flys, 2.0

+4k EDZ 86/87 1x2c spds, 1.75

3.5k EDZ 86c, 3.5

-3.5k EDH 80/82p spds, 1.0

-2k EDZ 85 straddles, 13.5

+5k EDZ'18 82/85p spds, 8.5 vs.

-EDZ'18 85/87c spds, 6.5

4.5k EOX 78/80/81p flys, 1.0

-2k EOM 82 straddles, 39.5

1k EOU 85/86c spds, 1.5

+15k E2Z 85/87 2x3c spds, 3.0, also Blck'd

+5k E2Z 78/81p spds, 9.5

3k E2Z 77p, 4.5 vs. 98.10/0.16% vs.

E4Z 72p, 4.0 vs. 97.75/0.16%

2.5k E2U 77/78p spds

2k E2U 80/81p spds

-1.5k E2Z 81 straddles, 28.5 w/

-E3Z 78 straddles, 34.5

-12k E3Z 78/E3H 77p spds, 1.5

Tsy options

Pit/screen:

2.5k TYZ 129/131c spds, 11

1.5k TYU 125+/126c spds, 27

1k TYU 125.2p, 2

1k TYU 126+c, 23

1k TYU 125+/128 R/R, 1p ovr

4k wk3 TY 125+/126p spds, 2

+2.5k wk2TY 125.7p, 2

--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com

[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]